Tuesday, October 2, 2012


The Tax Foundation has published an interesting study titled “PUTTING A FACE ON AMERICA’S TAX RETURNS: A CHARTBOOK”.

This publication uses statistics and charts to identify and explain the following tax facts –

·      The Income Tax Burden Is Very Progressive

·      The Tax Burden Has Grown More Progressive Over Time

·      The Number and Percentage of Filers Who Pay No Income Taxes Has Reached Record Levels

·      The Average Tax Rate for the Rich Is More Than Twice the Rate for All Taxpayers

·      The Proliferation of Tax Credits is the Major Factor in the Growth in Nonpayers—Especially Refundable Credits

·      Refundable Tax Credits Exceed the Payroll Taxes Paid by Millions of Workers

·      Taxing Income over $1 Million at 100% Won’t Erase the Deficit

I have never been a fan of a “progressive” tax system, which says let us tax those with higher incomes proportionately more because they can afford it.

My millionaire client and I both walk into a 7-11 to buy a 16oz bottle of soda.  I go to the counter and am charged $1.29.  My client goes to the counter and, because he can afford to pay more, is charged $1.89.  Is this fair?

With a flat tax rate of, for argument’s sake, 10%, a person with $50,000 of taxable income would pay $5,000.  A person with $1 Million of taxable income would pay $100,000.  The million dollar earner is clearly paying more tax than the “average” earner – but not proportionately so.

Do those with higher incomes get a proportionately higher benefit from government services?  If you make more money you probably have need of more government services – but I do believe studies have shown that lower income individuals take advantage of a higher proportion of government services and benefits than those on the upper income levels.

As for refundable tax credits, my opinion is well known.  They distort the federal budget and are an open call for tax fraud to say the least.  One chart in this book listed above certainly voids the argument that most of those who pay no federal income tax are still “out of pocket” for federal payroll tax.


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